Collection agencies are companies that collect debts and money owed to individuals or businesses. They have the authority in most states to legally pursue and collect a debt through verbal and physical contact. Most companies are under the supervision of a law office or attorney who files the paperwork to present a case to a judge or magistrate. Collection agencies sue for several reasons but primarily to collect the money for their client such as a business or credit card company.
Collect Money
Collection agencies sue clients to collect past due funds. This is generally from an unpaid credit card or revolving credit account the client stopped paying on. The term "sue" indicates the legal process in which a plaintiff requests assistance from the court to collect past due amounts, plus interest, filing fees and fees for his services. If the original credit card amount is only $1500, the plaintiff could request $1000 or more depending on how long the interest has accrued and what his service charge is. This amount is presented in front of a judge, and if the judge finds the debt valid he will enter a judgment. If the plaintiff wins the judgment, he is legally able to collect the debt. This is done through wage garnishment, tax refund garnishment, garnishing bank accounts, placing a lien on property and physically collecting items of value from the client.
Contract Agreements
Another reason a collection agency may sue is to fulfill a contract agreement it signed with the original creditor. The agreement likely includes collecting debt by contacting the debtor and asking him to pay so the debt does not go to court. If the collection agency is unsuccessful, the collection agency files the paperwork to sue the creditor in a court of law. If the collection agency is unable to collect the debt, they may lose future business contracts with the creditor.
Generate Contact
Collection agencies sue because they cannot make verbal or written contact with a debtor. Most are willing to offer payment arrangements or a cash settlement agreement to prevent a case from going to court. They can only do this if they make an agreement in writing or over the phone with the debtor. A lawsuit is filed if the debtor doesn't comply.
Meet a Quota
Most collection agencies have bill collectors and customer service representatives who work for them. Customer service representatives and bill collectors make hourly wages but still must meet a daily, weekly or monthly quota to contact and attempt to collect a debt from overdue accounts. If customer service representatives and bill collectors fail to reach agreements or contact the debtor, they face the risk of a pay cut or losing their job.
Gain Profit
Collection agencies are in business because they need to make a profit for their services. Collection agencies have a flat fee they charge to skip trace, research and contact a debtor. Collection agencies charge for their hourly legal services and travel time to draw up paperwork, hire staff, file a lawsuit and travel to and from court appointments. The collection agency wants to make the most money from each client. Efficiency, prompt recovery and turnaround time are necessary.
Member Comments